20 years ago, National CooperativeRx was founded as a member-owned not-for-profit to provide plan sponsors with expertise and purchasing power when working with a pharmacy benefit manager (PBM). While our oversight and expertise has evolved to meet the needs of the marketplace, our core remains negotiating a best-in-class contract with a PBM.
In partnership with our consultants at PricewaterhouseCoopers (PwC), our process for a new PBM contract began in September of 2023. Eleven PBMs of various sizes and pricing models were evaluated. Detailed pricing proposals were analyzed from four PBMs. This led to an agreed-upon renewal with CVS Caremark, who provided the greatest overall value.
CVS Caremark provided the greatest combination of locked-down terms, full audit rights, the most inclusive rebate definition, and greatest overall pricing value. While the next closest bidder came close on pricing value, limits to audit rights and definitions proved to widen the gap in overall value. In addition, CVS Caremark is in a unique position to offer an early renewal option. Members able to sign by July 1 will see the benefit of improved pricing for October 1, 2024.
While changing marketplace dynamics are normal in the pharmaceutical and PBM marketplace, there is an abnormally high number of dynamics to navigate over the coming months and years. National CooperativeRx will continue to work in the best interests of its members to navigate these complexities. We are fortunate to navigate these changes with our longtime PBM partner.
One complexity is how overall PBM contract improvement is calculated. Using traditional methods, the analysis of PwC and CVS Caremark calculated improved value for 2025 around 20%, compared to 2024 contract value. The complexity comes in rebate guarantees, rebate credit language, and their interplay with lower list prices. The improved value is modeled based on 2022 claims data, a world of high list prices and high rebates. Specifically, insulin and Humira. As patients and plan sponsors benefit from lower list prices, these changing dynamics will drive rebate value lower. Said another way, the future savings from lower list prices are showing up as rebate value today.
This contract, with added oversight from the Cooperative team, is well positioned to support members through this market change. For an apples-to-apples comparison, PBMs are still modeling high rebate value for these medications. Our detailed rebate credit language will lock down and limit the application of rebate credit, while still allowing the PBM to apply rebate credit to arrive at a lower net cost for plan sponsors and a lower list price for all.
This renewal with CVS Caremark is further positioned to benefit from changes occurring in the marketplace, as well as impacts resulting from federal legislative action. We look forward to outlining:
- Improved specialty discounts.
- Improved definitions and processes to capture discount value earlier on new-to-market drugs.
- Rebate value shifts from the true-up process to the guaranteed payments, in order to provide money to members earlier.
- Commitments of improved support from the CVS Caremark team.
- Resetting of brand and generic pricing discrepancies that cause patients to look outside the benefit.
- CVS Caremark’s new pricing model, TrueCost, when available.
While we fully market the Cooperative’s purchasing power every 3 years, contract negotiations led to the removal of the rebate guarantee penalty for early termination of the contract, by members, upon 90 days’ notice and completion of the 2025 year. Individual members can move to another PBM, free of rebate penalty, should marketplace changes suggest there is a better solution. As we do today, the Cooperative will continue our annual market check process, with all improvements benefiting membership.
National CooperativeRx delivers a contract negotiated in the best interest of members, with 100% of that contract value seen by plan sponsors. We are confident this contract will continue to provide industry-leading pricing. Just as important, it will provide contract terms and definitions to ensure the pricing guarantees are met. With the overlay of our continued oversight functions, we are convinced we provide the best PBM solution in the marketplace.
With the fiduciary duties of health plan sponsors coming into focus, market analysis and oversight functions gain importance. A newly created fiduciary duty document outlining the Cooperative’s due diligence and oversight functions will be provided as part of the renewal process. This document will provide plan sponsors solid footing should a question arise surrounding management of their pharmacy benefit.
In the coming weeks, the Cooperative team will begin sending renewal information to members and partners. We look forward to sharing details and outlining value. The Cooperative team is prepared to provide group-specific savings calculations, outline renewal options, and provide important timelines. Please watch for the signature documents coming from Sharefile, as it is a time-sensitive step in the process.
We look forward to supporting members and partners through this renewal process. The growth in contract value and Cooperative oversight functions is made possible by the support of our membership. New membership opportunities for 2025 are already coming in. With strong renewal of current members, we can grow the Cooperative to exciting new heights!
